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Unilateral tax reform under the restricted origin principle

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  • Haufler, Andreas

Abstract

We analyze the restricted origin principle for taxing international trade in a three-country, three-commodity model where two of the countries form an economic union. Using simplifying assumptions with respect to the initial tax equilibrium and the structure of preferences, the effects of a Variation in one union country's general com-modity tax rate on relative prices and national welfare in each of the trading nations are derived. It is argued that each of the union countries can increase the domestic tax base at the expense of its union partner by reducing the general commodity tax rate. This suggests that a process of downward tax competition between union members might take place under the restricted origin principle.

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  • Haufler, Andreas, 1991. "Unilateral tax reform under the restricted origin principle," Discussion Papers, Series II 142, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    • Handle: RePEc:zbw:kondp2:142
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    1. Bernd Genser & Andreas Haufler, 1996. "Tax competition, tax coordination and tax harmonization: The effects of EMU," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 23(1), pages 59-89, February.
    2. Fabio Antoniou & Panos Hatzipanayotou & Michael S. Michael & Nikos Tsakiris, 2022. "Tax competition in the presence of environmental spillovers," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(3), pages 600-626, June.
    3. Pascal Belan & Stéphane Gauthier, 2009. "Commodity Tax Competition with Constrained Taxes," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(4), pages 653-665, August.
    4. Pascal Belan & Stéphane Gauthier, 2008. "Commodity Tax Competition and the VAT Base in the European Union," Working Papers 2008-17, Center for Research in Economics and Statistics.
    5. Fabio Antoniou & Panos Hatzipanayotou & Nikos Tsakiris, 2019. "Destination‐based vs. Origin‐based Commodity Taxation in Large Open Economies with Unemployment," Economica, London School of Economics and Political Science, vol. 86(341), pages 67-86, January.
    6. Fabio Antoniou & Panos Hatzipanayotou & Nikos Tsakiris, 2015. "Destination vs. Origin-based Commodity Taxation in Large Open Economies with Unemployment," CESifo Working Paper Series 5585, CESifo.

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